Charity warns of pandemic rise in problem debts

Debt charity StepChange has warned that households experiencing problem debt were already facing a cost of living crisis even before the latest rise in inflation and energy prices.

The charity said that of its clients in 2021, 28% were in arrears on their electricity bill, and 23% on their gas bill – compared to 17% and 13% respectively in 2019, before the pandemic. StepChange said it expected to see a worsening of energy bill arrears over the coming months.

Meanwhile 37% of StepChange clients who were obliged to pay council tax were in arrears, compared to 30% in 2019.

Over half (56%) of all new StepChange clients in 2021 had some form of additional vulnerability as well as their financial vulnerability. The most common forms were:

• Depression (13%)
• Stress or anxiety (13%)
• Physical disability (7%)
• Suicidal tendencies (6%)
• Domestic violence (5%)

Poor mental health remains closely associated with debt problems, and 39% of all new clients were experiencing some form of impaired mental health at the time of advice.

London and the South East together accounted for nearly a quarter of the total number of people who turned to StepChange for help in 2021. However, the North East showed the highest incidence as a proportion of the population. Around one in every 250 people in the North East sought help from StepChange in 2021, compared to one in 333 in London.

Richard Lane, Director of External Affairs at StepChange, said: ‘It’s impossible to look at the characteristics of our clients and their debts in 2021 and not conclude that more help is needed. When so many people are already struggling to make ends meet, a steep rise in the cost of living means debt becomes inevitable for many.

‘With arrears on priority bills becoming more common, 2022 is going to be a tough year for many, and not just because of energy prices. We can see that the financial impact of the Covid pandemic was still being felt among many of our clients last year, and this is now being exacerbated by cost of living pressures. If things go on as they are, we could see the proportion of our clients who have a negative budget rise from around a quarter to more like a half.

‘To avoid a prolonged hangover of household debt problems that will hamper society and the economy for years, the Government needs to take additional steps. A start would be central and local government pausing deductions and halting debt enforcement and the use of bailiffs where households are vulnerable and unable to pay.’

Photo by Dylan Gillis